by Calculated Risk on 5/09/2010 12:11:00 PM

Update2: Report: Meeting delayed. German Finance Minister Wolfgang Schäuble has been taken to a hospital with an "adverse reaction to medication". (ht Schaeffer)

Update: Live Press conference will probably be here.

No word on press briefing yet, but ...

From the Financial Times: EU to expand emergency fund by at least €60bn

The article mentions:

1) "Expand a €50bn balance of payments facility that the EU used in 2008 to help Latvia, Hungary and Romania ... This facility, which would be increased by at least €60bn, would be extended to cover the eurozone’s 16 members. Assistance would carry conditions set by the International Monetary Fund." This will be financed with EU bonds guaranteed by all EU member-states.

2) Some sort of "stabilisation mechanism" comprised of "bilateral loan guarantees between eurozone countries".

3) Some analysts are still expecting ECB to introduce exceptional measures.

The WSJ is reporting that exit polls show German Chancellor Angela Merkel's "alliance will lose re-election in Germany's most-populous state" and she will lose control of the Upper House of Parliament.

by Calculated Risk on 5/09/2010 08:53:00 AM

Not much information this morning. The European Union finance ministers are meeting in Brussels and a press briefing is scheduled for noon ET (6 PM Brussels).

Some finance minister comments via Reuters: EU finance ministers' meeting on crisis mechanism (ht Counterpointer) From Finnish Finance Minister Jyrki Katainen speaking in Helsinki:

"The situation in the financial markets has gone in a very bad direction, even though the Greek situation was brought under control."

"Now we have to do everything we can to bring stability in time."

"The alternative is still the same as when we talked about Greece: the threat of a serious bank crisis."

Should a banking crisis occur: "We know what would happen. The bank crisis would not be one of a few countries, rather it would lead to a full recession in Europe."

by Calculated Risk on 5/08/2010 08:30:00 PM

From Nelson Schwartz and Eric Dash at the NY Times: Greek Debt Woes Ripple Outward, From Asia to U.S.

What was once a local worry about the debt burden of one of Europe’s smallest economies has quickly gone global.
...
“It seems like only yesterday that European policy makers were gleefully watching the U.S. get its economic comeuppance, not appreciating the massive tidal wave coming at them across the Atlantic,” said Kenneth Rogoff, a Harvard professor of international finance who also served as the chief economist of the International Monetary Fund. “We should not make the same mistake.”

by Calculated Risk on 5/08/2010 05:17:00 PM

While we wait for the details ...

PIMCO's Mohamed El-Erian writes in the Financial Times: El-Erian on a critical weekend for Europe and the economy

[W]e have to wait for tomorrow’s operational details. ... [But] we should not under-estimate the historical relevance of what is happening this weekend; and the stakes for Europe and the global economy are huge.

If this rescue attempt does not work, there will be a material acceleration in the process of change to Europe’s economic, financial, and institutional landscape; and the reality of the debt explosion in industrial economies will become even more of a destabilizing factor for the world economy.

Tomorrow will be interesting!

by Calculated Risk on 5/08/2010 01:14:00 PM

This graph shows the duration of unemployment as a percent of the civilian labor force. The graph shows the number of unemployed in four categories as provided by the BLS: less than 5 week, 6 to 14 weeks, 15 to 26 weeks, and 27 weeks or more.

Note: The BLS reports 15+ weeks, so the 15 to 26 weeks number was calculated.

This really shows the change in turnover - there was more turnover in the '70s and '80s, since the 'less than 5 weeks' category was much higher as a percent of the civilian labor force than in recent years. This changed in the early '90s - perhaps as a result of more careful hiring practices or changes in demographics or maybe other reasons - but if the level of normal turnover was the same as in the '80s, the current unemployment rate would probably be the highest since WWII.

What really makes the current period stand out is the number of people (and percent) that have been unemployed for 27 weeks or more. In the early '80s, the 27 weeks or more unemployed peaked at 2.9 million or 2.6% of the civilian labor force.

In April 2010, there were 6.72 million people unemployed for 27 weeks or more, or 4.34% of the labor force. This is significantly higher than during earlier periods.

It is worth repeating some of the comments Atlanta Fed President Dennis Lockhart made in March:

There are two key types of match inefficiency. One is geographic mismatch. In 2008, the percentage of individuals living in a county or state different than the previous year was the lowest recorded in more than 50 years of data. People may be reluctant to relocate for a new job if the value of their house has declined. In addition, many who would like to move are under water in their mortgage or can't sell their homes.

The second inefficiency is skills mismatch. In simple terms, the skills people have don't match the jobs available. Coming out of this recession there may be a more or less permanent change in the composition of jobs.

Both of these mismatches are contributing to the long term unemployment problem - and the housing bubble was a direct cause of both. Usually people can move freely in the U.S. to pursue employment (geographic mobility), but now many people are tied to an anchor (their home). And many workers went into the construction trades and acquired skills that are not easily transferable.

The good news is the economy is now adding jobs. But the lack of mobility and the skills mismatch make the long term unemployment problem a difficult challenge.